Israel, the Land of Mergers and Acquisitions

December 18, 2009

Mergers and acquisitions activity in the Israeli telecom market has been intense during the second half of 2009. This has been driven by a desire among operators to secure a presence in all three sector of the market — fixed, mobile and TV. However, not all interested parties were successful.

For instance, despite its eagerness to partake in the M&A frenzy, Bezeq, the Israeli incumbent was denied permission by the Israeli Supreme court to increase its ownership in Yes, its part-owned DTH subsidiary, never mind merge with it. The outcome was quite the opposite: 012 Smile.Communications, a telecom services provider owned by Eurocom Communications, is buying a controlling 30.6% stake in Bezeq. For the deal to go through, Smile in turn is required to sell its own 33% stake in Yes as well as to dispose of its existing telecommunications operations, which it is selling to Ampal-American Israel Corp.

The victor in this M&A battle appears to be Hot Cable Systems Media. After 44% of the cable player got acquired earlier in 2009 by French investor Patrick Drahi, who also owns a 24% stake in French MSO Numericable, Hot is now getting a subsidiary, mobile operator Mirs. Only a few days ago, Drahi, acting through Cool Holdings, was announced as the acquirer of Motorola Integrated Radio Systems (Mirs), a small iDEN operator. A competing offer by Bezeq’s mobile arm Pelephone, even though it was the highest bid for Mirs, was deemed unlikely to get regulatory approval.

Despite its small size, Mirs is a valuable asset. We estimate it currently has more than 500,000 subscribers (see our Israel Mobile Demand Forecast), but it focuses on a niche market: kosher handsets, armed forces personnel and their families as well as the public sector. Hot, the only cable operator, already offers triple-play services and is the top TV player, providing lucrative value-added services such as VoD, PVR and HD. The acquisition of Mirs further strengthens Hot’s position and gives it the extra edge of being able to provide quad plays as well (for more details on Israel’s telecommunications market see our recent Country Intelligence Report on Israel). As a result of these developments, we expect Hot’s share of total telecom revenue to grow from 11% in 2009 to 15% in 2014.

— Sylwia Boguszewska, Analyst

Related resources:

Africa & Middle East Mobile Demand Forecast
Forecasts published quarterly
Our Mobile Demand Forecast products provide complete pictures of demand trends for 25 geographical markets in Africa & Middle East. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market. Data from these Forecasts is available online for subscribers to our DataTracker service.

Israel: Market Maturity Points the Way to Network Operator M&A
Country Intelligence Report published December 2009
The Israeli communications market is expected to generate almost $6.4bn in service revenue in 2009 and roughly $6.9bn in 2014. Mobile revenue dominates the market — in 2009 accounting for 61% of total revenue. Due to increasing disconnections of circuit-switched lines, the mobile sector will continue to outperform the fixed throughout the forecast period. This Country Intelligence Report analyzes Israel’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.

Africa & Middle East Mobile Operator KPI Forecasts
Forecasts published quarterly
Our Mobile Operator Key Performance Indicators Forecast products provide a complete picture of wireline voice and data communications in each of 25 African & Middle Eastern markets. The Excel output includes five years of historical data and five years of market projections for metrics such as subscription totals, market shares, net and gross additions, prepaid and postpaid subscriptions, business subscriptions, data ARPS, aggregate ARPS, prepaid and postpaid MOU, churn and total service revenue — all broken down for the mobile operators in the respective markets. We believe our Mobile Operator KPI Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.